2009S0040-2 01/27/09
By: Lucio S.B. No. 685
A BILL TO BE ENTITLED
AN ACT
relating to authorizing the commissioner of insurance to further
regulate the financial security and operations of certain insurance
companies through local districts or chapters.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
SECTION 1. Section 912.056, Insurance Code, is amended by
adding Subsections (d), (e), and (f) to read as follows:
(d) A company organized and operating under this chapter
that historically appointed managing general agencies, created
districts, or organized local chapters and that cedes 90 percent or
more of its direct and assumed risks to one or more reinsurers may
appoint and contract with a managing general agent in accordance
with the provisions of this code to manage a portion of its business
independent of all other business of the company. The company shall
file, for each managing general agent, district, or local chapter
program, the rating information required by the commissioner by
rule. Each managing general agent, district, or local chapter
program shall be treated as a separate insurer for the purposes of
Chapters 544, 2251, 2253, and 2254.
(e) Notwithstanding any other provision of this code, a
company operating under Subsection (d) that utilizes more than one
rate filing per line of business shall maintain a minimum amount of
unencumbered surplus or a minimum amount of guaranty fund and
unencumbered surplus equal to the greater of $2 million or five
percent of the company's net recoverable for reinsurance after
taking full credit against the recoverable as otherwise permitted
for:
(1) premiums payable to cedents net of ceding
commission due the company;
(2) collateral held as required by Section 493.104,
letters of credit, and security trusts that secure the collection
of the reinsurance;
(3) cut-through policy endorsements approved by the
commissioner; and
(4) reinsurance through reinsurance companies whose
financial strength is rated A or better by the A. M. Best Company,
Incorporated.
(f) The commissioner by rule shall provide a transition
period for insurance companies subject to Subsection (e) to meet
the requirements of that subsection and for the pro rata
elimination of any deficiencies in the amounts required under that
subsection. The transition period must be:
(1) not less than five years for companies that have a
market share of 10 percent or more; and
(2) not less than 10 years for companies that have a
market share of less than 10 percent.
SECTION 2. This Act takes effect September 1, 2009.